| Account Limit | |
| The total amount of deposit required from a client at any one time based on the size of the trade. | |
| After hours deal | |
| The stock exchange closes at 3.30pm but deals are often done after this time and the transaction dated the following day | |
| Allotment letter | |
| A document showing that you have been allotted a certain number of newly issued shares. | |
| AIM | |
| the Alternative Investment Market, a UK trading market used by smaller companies looking to raise finance. AIM listed shares avoid full compliance with LSE rules. | |
| Annual general meeting (AGM) | |
| Every company must have an AGM each year, to allow shareholders to vote on the accounts, directors and dividends and question the board on the company's affairs. | |
| Annual Report | |
| The yearly independently audited report to shareholders which must be produced by all publicly quoted companies. | |
| Arbitrage | |
| the attempt to profit by exploiting the price difference for the same financial instrument from one spread betting company to that of another. | |
| Articles of Association | |
| A document setting out the objects and administration of the company. | |
| Ask | |
| also called 'offer'. Indicates a willingness to sell a future or share at given price. Opposite to Bid. | |
| At best | |
| An order to a stockbroker to get the best possible price he can obtain for your benefit as opposed to limiting your order to a fixed price. | |
| Auction | |
| a system in which buyers and sellers enter competitive bids and offers simultaneously. | |
| Auto Sales | |
|
Car sales are tremendously important to the US economy but their volatility can make them an unreliable indicator. New models introduced at the end of summer and in early spring tend to have a disproportionate influence on sales figures. That said, strong figures are a good sign that consumer demand is picking up. They can be seen as indicating higher future production if demand is sustained over three or four months. The size of the item in question and the timeliness of the release allow auto sales to be a useful leading indicator of retail sales and personal consumption expenditures data. Release Date: Around the 13th of each month Release Time: 13:30 GMT |
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| At the money | |
| where the strike price of an option is equal to the current market level. For example FTSE 100 index is trading at 6,100 in the cash, then the 6100 series of option will be at the money. | |
| BACS | |
| Bankers Automated Clearing System. A system set by a group of banks and building societies to allow electronic transfer of funds to take place. | |
| Backwardation | |
| Referring to commodity markets. The situation where the price for immediate delivery of a commodity is higher than the price for some future date. | |
| Balance sheet | |
| A statement of assets and liabilities that must form part of a company's accounts. | |
| Balance of Payments (BOP) | |
| The Balance of Payments (BOP) is the method countries use to monitor all international monetary transactions at a specific period of time. Usually, the BOP is calculated every quarter and every calendar year. All trades conducted by both the private and public sectors are accounted for in the BOP in order to determine how much money is going in and out of a country. If a country has received money, this is known as a credit, and, if a country has paid or given money, the transaction is counted as a debit. Theoretically, the BOP should be zero, meaning that assets (credits) and liabilities (debits) should balance. But in practice this is rarely the case and, thus, the BOP can tell the observer if a county has a deficit or a surplus and from which part of the economy the discrepancies are stemming. | |
| Balance of Trade | |
| The largest component of a country's balance of payments. It is the difference between exports and imports. Debit items include imports, foreign aid, domestic spending abroad and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy, and foreign investments in the domestic economy. The US merchandise trade balance has been in a deficit since the mid-1970s. Rising deficits can be reflective of increased consumption, which can be a sign of a strengthening economy. Release Date: Around the 12th of each month Release Time: 13:30 GMT |
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| Bargain | |
| The term for any deal on the stock exchange, purchase or sale. | |
| Basis of Expiry | |
| The specification of the price at which a contract (bet) expires. | |
| Bear | |
| a client who makes a 'down bet', hoping the market will fall. | |
| Bearer stocks | |
| Stocks which are not registered in the name of the owner. They are therefore transferable by delivery like a currency note and should always be kept in a safe place, preferably in the bank. | |
| Bed and breakfast deal | |
| Selling shares one day and buying them back the next in order to establish a profit or a loss for tax purposes. | |
| Beige Book Fed Survey | |
| Bet size factor | |
| the number used, multiplied by your stake size, to determine the margin required to do a particular trade. For example, if your stake size is GBP10 and the bet size factor is 10 then the margin required is GBP100. | |
| Bid | |
| the price at which a client can make a 'down bet' (sell) with the spread betting firm. | |
| Bid price | |
| The price you sell your stocks or shares. | |
| Big bang | |
|
New Stock Exchange regulations with effect from 27th October 1986. Briefly, it means the end of the closed shop whereby stockbrokers could only deal with jobbers (the market wholesalers of shares). Now all Stock Exchange firms can combine the job of stockbroker and jobber in which case they are known as market-makers. Information technology will expand. A market-maker will be able to display his current prices on terminals accessible anywhere in Britain - and indeed the world. Deals must be reported to a central computer within five minutes by the market-maker. You will not only be able to tell what the latest prices are, but also the volume of business being done. |
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| Biowoff Volume | |
| a very high volume trading session occurring suddently in an uptrend signaling the end of the trend. | |
| Blue button | |
| A stockbroker's clerk who is allowed on the trading floor. | |
| Bond | |
| a certificate of debt issued by a government or corporation that guarantees payment of the original investment plus interest by a specified future date. | |
| Black Box Trading (Automatic Trading) | |
|
refers to trading using computer-based software systems with buy/sell instructions generated and activated by a proprietary program, along with calculation of appropriate stake sizes in relation to balances held. You can extend it to calculate and prepare related tax returns. Automatic Trading systems have become enormously popular in recent years, because they offer a consistent, unemotional approach to the markets, and because some of them do work. For many, Black Box Trading presents an easy way of taking advantage of professional trading expertise; buying into a tried and tested system without having to know how it works. Trouble is, the average ones will cost you several thousand quid. The good ones will likely cost a five figure sum. |
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| Bookmaker | |
| a company that will take on the opposite side of a bet that a client makes. A loose term to refer to a spread betting company. Usually, a spread betting company will hedge its client's bet by making a similar bet. | |
| Bolting | |
| This is when you close a spread bet before expiry. An up-bet is closed out pre-expiry by placing an equivalent down-bet from the sell rate at the time. A down-bet is closed out by placing an equivalent up-bet from the buy rate at the time. Profit/loss is based on the relative buy/sell prices at commencement and closure. | |
| Blue chip | |
| The shares of large well established companies. The expression is thought to have been derived from blue chips, the highest denomination of chips used in casinos. | |
| Bonus issue | |
| A free issue of shares to shareholders in proportion to their existing holdings. For example, if you hold 200 shares in Lucky Days PLC who give a bonus issue of one for one you will receive another 200 shares. You now hold 400 shares, but you may be no better off initially because the price of the shares in the market can halve. The object of the exercise is to divide the company's capital into more manageable units. Also known as scrip issue or capitalisation issue. | |
| Breakaway gap | |
| a gap in prices that signals the end of a price pattern and the beginning of an important market move. | |
| Break even | |
| the point at which an option or futures buyer or seller experiences no loss and no profit on an option. Call break even equals the strike price plus the premium. Put break even equals the strike price minus the premium. | |
| Bull | |
| a client who makes an 'up bet', hoping the market will rise. | |
| Bull market | |
| a market in which prices are rising. | |
| Bullish key reversal | |
| a bar chart formation that occurs in a down trending market when the day's high is higher, low is lower and close is above the previous days, can signal an up coming up trend. | |
| Business expansion scheme | |
| A scheme for allowing investors to put money into shares which are not quoted at the stock exchange or the Unlisted Securities Market. Buyers get tax relief if they hold the shares for at least five years. The aim is to help small companies obtain finance. | |
| Buy on opening | |
| to buy at the beginning of a trading session at a price within the opening range. | |
| Business Day | |
| for margin purposes, a business day is classified as any day excluding Saturdays, Sundays and any UK Bank/Public holiday. | |
| Business expansion scheme | |
| A scheme for allowing investors to put money into shares which are not quoted at the stock exchange or the Unlisted Securities Market. Buyers get tax relief if they hold the shares for at least five years. The aim is to help small companies obtain financetd> | |
| Call | |
| A further instalment due on shares which are only partly paid. For example, there were two calls on British Telecom shares of 40p each | |
| Call Option | |
| the right, but not the obligation, to buy a market at a specified price (the strike price) on a particular date in the future. | |
| Call profit/loss | |
| for a long call, equal to the call value minus the premium. For a short call, equal to the premium minus the call value. | |
| Capital | |
| The money used to set up a business. Share capital is the money which is raised by selling ordinary and preference shares to shareholders. Loan capital is long-term borrowings. Authorised capital is the total amount in shares a company is empowered to issue. Paid-up capital is the amount of shares the company has sold to shareholders. | |
| Capitalisation issue | |
| See Bonus issue. Also known as scrip issue. | |
| Cash settlement | |
| Some deals such as Gilts and traded options are done for cash rather than for account settlement. These deals have to be settled the day following the deal. | |
| Capital | |
| The money used to set up a business. Share capital is the money which is raised by selling ordinary and preference shares to shareholders. Loan capital is long-term borrowings. Authorised capital is the total amount in shares a company is empowered to issue. Paid-up capital is the amount of shares the company has sold to shareholders. | |
| Capital gains tax | |
| tax paid for profits made on an asset that has been held for a certain period of time. | |
| Capitalisation issue | |
| See Bonus issue. Also known as scrip issue. | |
| Cash and Carry | |
| This is a forex strategy involving selling a low interest-rate currency and using the money to buy a currency that yields a higher rate. If for instance you sold a currency with a 2% interest rate and bought another with a 7% interest rate, you would gain 5% as long as the exchange rate between the currencies doesn’t change. This strategy doesn’t work in high volatility environments. | |
| Cash call | |
| a demand from a spread betting company for extra funds to cover a bet that is losing money. Also called margin call. | |
| Cash price | |
| current market price of the actual physical share or commodity. Also called 'spot price' in the currency market. | |
| Cash settlement | |
| Some deals such as Gilts and traded options are done for cash rather than for account settlement. These deals have to be settled the day following the deal. | |
| CD | |
| See 'Certificate of Deposit' above. | |
| Certificate of Deposit | |
| A 'CD' is a Certificate of Deposit (time deposit). You can get these at any bank. You'll have to deposit a decent amount, maybe a minimum of 1,000.00 for a certain amount of time, maybe 1, 2 or 5 years. In return, the bank will offer you BOTH your money back at the end of the time, and a guaranteed payment for letting them keep it (that's 'interest'). Because they know they can have your money for a whole year, they will give you more interest (but not much more) than a standard savings account. | |
| CHAPS | |
| Clearing House Automated Payment System. A system in the Uk to make cash payments in pounds. The receiver gets the fund on the same day. | |
| Chartist | |
| one which engages in technical analysis. | |
| Charts | |
| graphs that show the movement of a traded product. Chart patterns are used to make trading decisions. See technical analysis. | |
| Closing trade | |
| a second bet of equal size to the initial bet, but in the opposite direction, and therefore taking a profit or loss. For example, a closing trade for a buy bet is a sell bet. Also called a closing bet. | |
| Compensation fund | |
| A fund maintained by the Stock Exchange to make good any losses to the public if a stockbroker should fail. | |
| Commodities | |
| physical products, such as foods or metals, which are processed and resold. Investors usually buy or sell these products through futures contracts. | |
| Contingent orders | |
|
A contingent (or 'if done') order is where a stop or limit order is placed and, 'if done,' a second order is automatically set against the new open position. In other words it is a mechanism by which first a stop or limit order is placed; then, if and only if the order is triggered, a second order is automatically set against the new position. Orders contingent on another event happening are a popular way of managing a position. In the most common scenario, a limit or stop order is placed which will be executed if the market reaches a certain level. A contingent order is then placed against this first order when triggered. The second part of the order cannot be acted upon unless the first part has been executed. Example: The GBP/USD CFD quotes at 1.9550-1.9553. You set an order to sell 250,000 CFDs above the current market quote at 1.9600. If this order is filled and opens a position, you wish to work a stop order at 1.9700 and a limit order at 1.9500. |
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| Contract month | |
| the month in which futures or spread bets must be settled. In the commodities market it would be the month that a commodity would be satisfied by making or accepting delivery. Also called delivery month. | |
| Consolidation | |
| a price patterns characterized by extended sideways movement. | |
| Contrary opinion | |
| the general theory that one can profit by doing the opposite of the majority of traders are bullish, it implies that most market participants who believe prices are going higher are already long, and hence the path of least resistance is down. | |
| Controlled risk bet | |
| a bet which has a strictly limited maximum loss. In other words a controlled risk bet is a bet where the maximum loss is predefined (i.e. a bet with a guaranteed stop loss) | |
| Contract size | |
| the smallest amount at which a futures or options product can be traded in. Also called a lot size. | |
| Contract month | |
| the month during which a bet expires, often quarterly for financial markets. | |
| Contracts for difference (CFDs) | |
| a taxable derivative where the bid-offer price is quoted is very similar to that of the underlying product. It is a type of margin trading because only a margin of 10% to 20% of the full cost of the trade is required at the outset. | |
| Controlled risk bet | |
| see guaranteed stop-loss | |
| Convertible stock | |
|
A form of loan stock convertible into ordinary shares usually on a specified date, or
between specified dates. For example, a convertible loan stock 9% 2002 pays a regular 9% interest a year, but you have the choice to convert it into ordinary shares in the company at a specified rate of exchange (e.g. 2 ordinary shares for each £1 of loan stock) on say 1 June 2002. In some cases you are given a choice of dates and rates of exchange. For example, a convertible loan stock 2002/4 could offer you the choice of converting to ordinary shares on 1 June 2002 at 10 ordinary shares per £1 stock, or 1 June 2004
at 8 ordinary shares per £1 stock. It can be said that convertible stock offers a two-way bet because you continue to receive regular interest, but if the ordinary shares go up so will the price of the stock in accordance with the underlying value of the terms of the conversion. On the other hand, if the ordinary shares fall you can keep the convertible stock until its redemption date and continue to receive the regular interest payments. |
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| Corporate action | |
| an event that will change the capital structure of a company including a rights issue, scrip issue or special dividend. | |
| Contract note | |
| A written confirmation from the broker that a bargain (buying or selling) has been carried out. | |
| Convertible stock | |
|
A form of loan stock convertible into ordinary shares usually on a specified date, or
between specified dates. For example, a convertible loan stock 9% 2002 pays a regular 9% interest a year, but you have the choice to convert it into ordinary shares in the company at a specified rate of exchange (e.g. 2 ordinary shares for each £1 of loan stock) on say 1 June 2002. In some cases you are given a choice of dates and rates of exchange. For example, a convertible loan stock 2002/4 could offer you the choice of converting to ordinary shares on 1 June 2002 at 10 ordinary shares per £1 stock, or 1 June 2004
at 8 ordinary shares per £1 stock. It can be said that convertible stock offers a two-way bet because you continue to receive regular interest, but if the ordinary shares go up so will the price of the stock in accordance with the underlying value of the terms of the conversion. On the other hand, if the ordinary shares fall you can keep the convertible stock until its redemption date and continue to receive the regular interest payments. |
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| Coupon | |
| Coupon is the amount of interest payable on a fixed interest stock. | |
| Cover | |
| To exit or buy back a short position. | |
| Close to the money | |
| an option contract for which the strike price is close to the current market price of the underlying security. | |
| Cum dividend | |
| Shares sold entitling the buyer to receive the next dividend. | |
| Cum rights | |
| A share bought together with the rights issue attached to it. | |
| Cum scrip | |
| A share bought together with the scrip issue attached to it. | |
| Credit account | |
| a type of account where the client does not need to deposit funds. However, proof that shows the client's assets are enough to cover margin and payments is required. The opposite of a deposit account. | |
| Credit limit | |
| the total losses a client with a credit account can run on open bets before it is necessary to send in extra funds (or before a margin call) | |
| Currencies | |
| money in public circulation. | |
| Cut and reverse | |
| closing an existing position and opening a new position through one trade. For example, you can buy 20 Dec Lloyds and sell 30 Dec Lloyds, resulting in a sell 10 Dec Lloyds. Also called overclosure |
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